PERSPECTIVES

Fintech, CX & lessons from innovators

Named as one of the most influential people in banking and a top 5 Fintech Influencer to Follow, Jim Marous is an internationally recognized financial industry strategist, co-publisher of The Financial Brand and the owner and publisher of the Digital Banking Report. Marous advises on innovation, portfolio growth, customer experience, marketing strategies, channel shift, payments and digital transformation within the financial services industry.

Jim recently took time to discuss emerging trends in the banking industry for 2016.

Early this year you published a report on digital banking trends. Of the 10 trends highlighted, which one do you feel is the most critical for banks to get right?

When we surveyed close to 100 global financial services influencers, the most mentioned trend was the future partnership of traditional financial services organizations and Fintech films.

"I believe the increased focus on partnering with Fintech start-ups and a continued emphasis on removing friction from the customer journey will be the most important trends for 2016."

This is a significant change in an industry that as recently as last year viewed Fintech firms as competitors. The reason for this paradigm shift is because new Fintech start-ups lack the scale, capitalization, reputation of security, ability to navigate complex regulations and the product scope of traditional financial firms. Alternatively, traditional banking organizations are hindered by legacy operating systems, capacity to innovate, agility and technology expertise.

While the partnership of Fintech and banking was the most mentioned trend for 2016 by our international crowdsourcing panel, I believe the most important trend for the banking industry is the need to simplify processes and remove friction from the consumer journey. From the time a consumer starts their shopping process for a new product or service, most banks and credit unions have roadblocks that make the buying process difficult. This can be as fundamental as a product landing page that lacks a shopping tool—to a new account opening process that is not optimized for mobile devices.

The consumer is no longer patient with firms that make their buying or banking process difficult or do not leverage the insight available to make engagement intelligent and simple. From the design of online and mobile banking apps to the digitalization of documentation, the consumer wants their financial partner to be integrated with their daily life and to be easy to access. They want real-time advice based on transactions and behavior, and are unforgiving when their bank or credit union does not know them, look out for them and reward them.

At the recent Accenture Efma Digital & Marketing Innovation Awards, you talked about what banks can learn from top innovators like Uber, Amazon, Apple, Airbnb and Tesla. What specifically are these companies doing that banks can learn from?All of the firms mentioned have optimized the ability to engage through the use of technology. Leveraging the power of mobile devices, advanced analytics, personalization and contextual offers, Amazon, Uber, Apple and Airbnb have simplified the buying process in ways that were not possible only a few short years ago. Integrating products and payments, these firms are the gold standard of how to design for the mobile-first consumer.

Similarly, Tesla has brought a new level of innovation to the automotive industry beyond their battery-powered engine. Unlike any car in the past, enhancements or product recalls are delivered as a software update. New enhancements and partnerships with the financial services industry could bring a new meaning to the phrase “mobile banking,” thanks to advanced dashboard capabilities.

All of these firms are also masters of simple design. Whether on a mobile device or through physical stores, the consumer experience is the focus. In all channels, there is a desire to deliver a highly personalized experience.

And how serious do you think is the threat from the Pure Plays—Google, Amazon, Facebook, Alibaba—and the smaller Fintechs—Lending Club, TransferWise, even Uber—which are approaching from a different angle: Digital culture, “open” platform, strong user experience?The degree of threat from Fintech start-ups, “challenger banks” and even technology companies like Google and Facebook will be determined by how well banks do in defending their traditional turf of a large, loyal consumer base that values safety, trust and personalized service. As I mentioned, our crowdsourcing panel believes that both traditional and non-traditional banking organizations can benefit from a “coopetition” form of engagement in the future. This is because both Fintech/technology firms and legacy banking organizations have strengths and weaknesses in their models.

That said, the benefits of scale and a somewhat lethargic customer base won’t hold off competition forever. If banks and credit unions do not answer the call for improved digital solutions that mirror the experience received at non-financial firms like Amazon, Uber and even Starbucks—there will be significant disruption in the industry.

I believe the banking industry of the future will be dominated by banking organizations that can bring together the benefits of a Fintech start-up or technology company with the advantages of a legacy bank. I envision traditional banking organizations that will maximize the power of advanced analytics to deliver an array of highly personalized, “owned” and “purchased” best-in-class financial solutions from an array of providers.

This structure will provide the customer with a simplified—yet expanded—selection of services from a single provider who will understand their overarching needs better than in the past. The structure will also cut the costs of traditional banking organizations that no longer need the back-office operations to support a complete product line.

What parts of banking do you think will be most affected and why? What can they do to overcome this challenge?I believe the biggest challenge will be for smaller organizations that may lack the culture, funding and innovation capability to respond to a rapidly changing consumer and competitor battlefield. In several recent customer surveys, it has been found that larger financial institutions are improving their satisfaction scores far faster than smaller firms. The primary reason for this phenomenon is the power of digital channels on satisfaction scores, and the difficulty for smaller firms to invest to the same degree as larger firms in these channels.

"[Consumers]… are unforgiving when their bank or credit union does not know them, look out for them and reward them."

Combined with the onerous level of investment required to respond to government regulations and the difficulty in upgrading legacy back-office systems, it is more challenging than ever for small banking organizations to compete with larger firms. Even the historical differentiator of more personalized service provided by smaller community-based banks and credit unions is being challenged by the high level of customization and personalization possible with digital channels.

While it won’t be impossible for smaller banking firms to compete, it will require strong leadership and a vision for the needs of a rapidly changing consumer.

As we kick off the New Year, what one or two predictions would you put at the top of your “2016 Predictions for the Banking Industry” list?As mentioned, I believe the increased focus on partnering with Fintech start-ups and a continued emphasis on removing friction from the customer journey will be the most important trends for 2016.

Unfortunately, while there will still be a lot of “buzz” around mobile payments in 2016—as there has been for the past three years—we will not reach the tipping point around digital wallets—primarily due to a lack of acceptance by merchants and the inability for the banking and payments industry to agree on a narrow range of options.

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